ECONOMICS

Detailed explanation-1: -Discounting is the process of determining the present value of a payment or a stream of payments that is to be received in the future. Given the time value of money, a dollar is worth more today than it would be worth tomorrow. Discounting is the primary factor used in pricing a stream of tomorrow’s cash flows.

Detailed explanation-2: -The time value of money is the central concept in discounted cash flow (DCF) analysis, which is one of the most popular and influential methods for valuing investment opportunities.

Detailed explanation-3: -The discounted payback period is a capital budgeting procedure used to determine the profitability of a project. A discounted payback period gives the number of years it takes to break even from undertaking the initial expenditure, by discounting future cash flows and recognizing the time value of money.

Detailed explanation-4: -The time-value-of-money concept is the idea that money flowing in or flowing out at some time in the future has less value, today, than an equal amount present or flowing in today. The discounted cash flow (DCF) calculation is an application of the time value of money concept.